Medical Loss Ratio

Updated May 2017

Medical loss ratio, or more accurately Medical Benefit Ratio according to the AMA, refers to the portion of health insurance premium that pays for services rendered.

The LA Times article State's major PPOs get low marks for customer service begs the question - what are they doing with the 20-25 cents (decreasing to 15-20 cents due to Obama-era legislation) on every healthcare dollar that is spent on administration and profit?

For this website, the more interesting question is the allocation of costs for HCIT. Perhaps this might be to subsidize e-prescribing or (unlikely in my opinion) care coordination. Unfortunately very little has been written to date.

Articles on Healthcare IT (context of Medical Loss Ratio)

Meaningful Use: Tasty Carrot or Big, Brutal Stick? An excerpt: "The managed care response is more enthusiastic on the quality data side, where more information could help plans better control the medical loss ratio — the percentage of revenue needed to pay for medical care."

Articles on Medical Loss Ratio

Status of Legislation

What Is a Medical Loss Ratio and Why Does it Matter?

NAIC submits final medical loss ratio recommendations to HHS

Reports of Obamacare's implosion are greatly exaggerated

Consumer Point of View

How much health insurers actually spend on you

Insurance Industry Asks For Broad Definitions In Medical-Loss Ratio, Lax Rate Review Standards A counterpoint to insurers who want to include ANY “activities that improve health care quality” (e.g., disease management) as medical expenses. The blog post argues that there is often no scientific basis for such classification.

Insurers use ‘medical loss ratios’ to cheat us summarizes NBER Working Paper No. 23353; Cost of Service Regulation in U.S. Health Care: Minimum Medical Loss Ratios

Insurer Point of View

Medical Loss Ratio Floor for Individual Plans Already Is Affecting Insurers, Broker Commissions - note no mention of providing better care which seems to be the intent of the legislation.

Mau-Mauing the Medical Loss Ratio

NAIC Response to Request for Information Regarding Section 2718 of the Public Health Service Act

How Might Health Insurers Respond to Medical Loss Ratio Regulation? Includes MLR data for major insurers.

Health Adminstrators Point of View

Legislating Medical Loss Ratio Leads to Unintended Consequences - MLR an easy target but isn't THE problem. Quotes past president of the California Association of Health Underwriters and National Association of Health Underwriters in Los Angeles that "administration funds also cover care coordination, disease management, health information technology, and customer service" which would be cut.

American Medical Association (2009) Administrative Costs of Health Care Coverage. See www.voicefortheuninsured.org

Plans Scramble to Defend Their Medical Loss Ratios - different numbers for different audiences

Health Care's Taxing Problem - general and administrative expenses 18-20% in USA but only 5% in Switzerland where Swiss citizens must buy their own individual policies

Medical Loss Ratio: Updates and Impact

Medical Loss Ratio by National Council of State Legislatures

Reports

Families USA 2008, Medical Loss Ratios: Evidence from the States, Washington, D.C.

Financial Performance of Health Insurers: State-Run Versus Federal-Run Exchanges "Insurers performed better in states that operated their own health insurance marketplaces than in states that used the federal marketplace, with the difference largely driven by medical loss ratios."

Cost of Service Regulation in U.S. Health Care: Minimum Medical Loss Ratios "We find that rather than resulting in reduced premiums, claims costs increased nearly one-for-one with distance below the regulatory threshold, 7% in the individual market, and 2% in the group market."

Academic Articles

Brennan, TA & Studdert, DM 2010, 'How Will Health Insurers Respond to New Rules under Health Reform?' Health Affairs, Vol. 29, no. 6, pp. 1147-51.

Iglehart, JK 2010, 'Defining Medical Expenses - an Early Skirmish over Insurance Reforms', New England Journal of Medicine, Vol. 363, no. 11, pp. 999-1001.

Jost, TS 2010, 'Writing New Rules for Insurers - Progress on the Medical Loss Ratio', New England Journal of Medicine, Vol. 363, no. 20, pp. 1883-5.

Kahn, JG, Kronick, R, Kreger, M & Gans, DN 2005, 'The Cost of Health Insurance Administration in California: Estimates for Insurers, Physicians, and Hospitals', Health Affairs, Vol. 24, no. 6, pp. 1629-39.

Robinson, JC 1997, 'Use and Abuse of the Medical Loss Ratio to Measure Health Plan Performance', Health Affairs, Vol. 16, no. 4, pp. 176-87.